AstraZeneca buys UK biotech firm

The Anglo-Swedish drugs group AstraZeneca today agreed to buy one of Britain's biotechnology successes for £702m.

Cambridge Antibody Technology (CAT) is a world leader in making drugs from antibodies, the body's natural immune defences, that generally have fewer side-effects than conventional medicines.

AstraZeneca is paying 67% of CAT's closing price on Friday, leading analysts to conclude that the drug giants was paying too much. Despite its potential, CAT is not expected to make a profit for another two years.

Navid Malik at Collins Stewart said AstraZeneca paid too much considering the quality of drugs in CAT's pipeline. "It was already collaborating with Cambridge Antibody, so why did it have to buy it?" Mr Malik said.

Europe's third-biggest drug maker already owns 19.2% of CAT from a research deal in 2004.

"None of CAT's projects are going to fill the big near-term gaps in AstraZeneca's pipeline," said Paul Diggle, an analyst with London-based brokerage Nomura Code Securities.

Major pharmaceutical firms are battling to strengthen their position in the fast-growing market for biological drugs, with analysts forecasting that sales of antibody-based treatments will more than double by 2010 from $14bn in 2005.

AstraZeneca has already made several acquisitions as its plans to release new products has been hit by the failure of a series of late-stage clinical trials, including for Exanta for blood clots and for Iressa for cancer in 2004, and more recently Galida for diabetes.

CAT helped develop Humira, a blockbuster drug for rheumatoid arthritis marketed by Abbott Laboratories of the US. The two companies settled a long-running royalty dispute last year that saw CAT receive a 2.69% share of the sales of Humira, expected to be $1.9bn this year.

"This acquisition represents a major long-term strategic investment by AstraZeneca in novel biological therapeutics," David Brennan, the chief executive officer of AstraZeneca said.